Price Reform and the Consumer in Central and Eastern Europe

The collapse of Communism in Poland, Hungary, and thenCzechoslovakia over the last several years has set the stage for the difficult beginning of free-market economies. In 1990, these countries started to wean consumers away from the government subsidies that had kept food prices artificially low for many years. After the subsidies stopped-and price controls were lifted-food prices soared at both producer and consumer levels. In quick succession, inflation rose and purchasing power dropped, reducing consumer demand-especially for meat and dairy products. Three years later, however, food prices in these countries appear to have stabilized, despite some continuing contraction in demand. Following the reforms, income has fallen, but a broad range of new goods have appeared on the market, fundamentally changing the range of choices available to consumers.